The first question is, what exactly is a big tech company? It is difficult to pin down what a tech company is and is not. There is no commonly agreed definition, but to take a closer look at the changes in big tech, we selected companies that meet the following criteria: (1) they have the highest revenue in the information and communication technology (ICT) sector and (2) they are publicly listed (to reflect market dominance). These criteria capture market leaders in or close to the ICT sector, of the greatest public interest and that have implemented the largest job cuts. As tech does not have a designated sector and multiple sources are used for this article, data on the information and communication sector and the broader ICT sector are used to provide context. Table 1 illustrates how the number of jobs changed in the six multinational tech companies meeting the selection criteria, from 2019 to 2022.
Table 1: Worldwide job cuts and headcount in six big tech companies, 2019–2022
Note: Company headcount per year is based on figures reported for Q4 of the reporting year, or where unavailable, Q1 of the following year, in SEC 10-K reports. Ranking in the table is based on size of total workforce.
Source: Authors’ calculations based on SEC 10-K annual reports
Assessing job cuts in big tech
During the COVID-19 pandemic, each of the companies announced revised growth strategies, with significant increases in their headcount to match forecasted expansion – growth that was due to the rapidly increasing demand for their respective products and services. In 2022, however, demand slackened as consumer behaviour changed, creating cost pressures for Amazon, Microsoft and Salesforce. For Google and Meta, a slowdown in advertising revenue was the leading driver of cost pressures. From November 2022 onwards, these companies announced large collective dismissals, targeting one of their largest operating costs: employees.
From 2019 to 2022, five of the tech companies grew their workforce anywhere from 50% to 125%. However, Apple is a curious outlier, with the most modest increase in headcount during the pandemic and no large job cuts. In August 2022, Apple announced a relatively small round of layoffs of 100 staff worldwide, followed by a hiring freeze in the second half of 2022. Eurofound’s European Restructuring Monitor (ERM), which records large-scale restructurings announced in the EU, recorded no planned job losses for Apple. Nevertheless, the company has made no official announcement confirming a proactive hiring freeze or cost cutting, which may explain the absence, or delay, in collective redundancies.
In contrast, Meta almost doubled its headcount from 2019 to 2022, but then ended 2022 by organising two rounds of layoffs, dismissing a total of 21,000 employees between November 2022 and March 2023. Increases in average revenue per person and forecasted post-pandemic growth had initially led to an enlarged recruitment strategy; however, after 2021, revenue per person and net revenue declined while the headcount continued to rise. This, alongside a fall in consumer purchasing power due to inflation and a new macroeconomic environment after Russia’s invasion of Ukraine, resulted in an immediate stop to hiring and a start to firing.
Amazon stands out from this group for being the largest employer, creating the most jobs during the pandemic and then cutting the most jobs when the environment changed. The job cuts, even though significant in number, are low when compared with the employment growth and number of employees. Since 2020, the ERM has recorded 46 cases of expansion for Amazon in the EU, accounting for two-thirds (65.5%) of large-scale job creation recorded in the retail sector, amounting to 110,660 jobs. This is corroborated by data from the company, which show that its headcount almost doubled from 2019 to 2022 (Table 1). Although Amazon can be viewed as operating in the retail sector (as classified in the ERM), its multitude of digital services and its digital-native business model means its workforce extends into the information and communication sector. In fact, the fastest growing part of the broader group is Amazon Web Services, its cloud services division.
Impact of tech layoffs in the EU
The same trend in the companies analysed is apparent: an inflated recruitment strategy during the pandemic and a steep reduction in employees thereafter. These companies are all headquartered in the United States and listed on US stock exchanges; however, Eurostat’s Labour Force Survey shows that the information and communication sector in the EU is characterised by the same trend of rapid increase followed by retrenchment. Very significant workforce growth took place in the first year of the pandemic (7.8% in 2020) and the second year too (6.5% in 2021), and growth continued above pre-pandemic levels in 2022, at 5.5% (see Figure 1). This is corroborated by the ERM: out of all the jobs in the information and communication sector recorded over 2020–2022, 85% were jobs newly created thanks to business expansion. Interestingly, even though the employment trend in the information and communication sector and the trend in total employment decoupled entirely after the first lockdowns – growing in the case of the former and contracting in the case of the latter – both have since been converging and growing faster in 2022 than before pandemic restrictions began.
Figure 1: Year-on-year change (%) in total employment and employment in the information and communication sector, EU, 2017–2022
Source: Eurofound, based on Eurostat data [LFSQ_EISN2]
It is important to note that in 2022 the information and communication sector in the EU represented just 5% of overall EU employment – a small percentage when compared with other sectors. It is therefore valid to ask: is it worth debating the potential impact of tech companies’ downsizing?
Although not all the companies announce specific redundancy numbers outside the US, all of these multinational giants have major offices in Europe. Microsoft’s biggest offices in Europe are in Ireland, the Netherlands, Germany and France. From the ERM data, it is clear that Ireland is by far the country most affected by big tech restructurings, which is not surprising since most of these tech companies’ European or EMEA headquarters are based there. Interestingly, the extent of layoffs in a specific country is not always in accordance with the size of global job cuts announced. For instance, Microsoft is cutting 5% of its global workforce, amounting to 10,000 jobs. But in France the reduction is 10% (260 redundancies from its 2,600 workforce), whereas in Ireland, it is 5% (180 redundancies from its 3,600 workforce).
Figure 2: Share of employment and value added of the information and communication sector in the total non-financial business economy, EU Member States, 2020
Note: Value added is the gross income from operating activities after adjusting for operating subsidies and indirect taxes. NACE section J is used for the information and communication sector. Missing values for NACE classifications include J59–J60 (motion picture, video, television programme production; programming and broadcasting activities) for Ireland and Luxembourg; J62–J63 (computer programming, consultancy and information service activities) for Luxembourg and Malta.
Source: Eurostat [sbs_na_sca_r2] and [NAMA_10_A64]
While individual cases are insightful, the impact of big tech restructuring on Member States depends on how much their economy relies on the tech sector. While the information and communication sector represents just 5% of overall EU employment, it generates substantial value added – gross income from operating activities minus operating subsidies and indirect taxes – in the total non-financial business economy. In addition, the workforce reaches over 8%, as is the case in Ireland (Figure 2).
From 2020 to 2021, employment in the information and communication sector in Ireland expanded by almost 19%, but the sector endured a turbulent year thereafter, and employment contracted by 4.6%. After collating cases of big tech job cuts from the ERM database from 2020 to mid-2023, Ireland accounts for the largest proportion of all redundancies in the sector in the EU (around 40%). Its high-skilled workforce is an important part of Ireland’s economy, and the wider ICT sector accounted for one-fifth of the country’s corporate tax revenue in 2021. According to the Central Bank of Ireland, 94.2% of imports and 97.8% of exports in ICT involve foreign firms that use Ireland as a platform to oversee their value chains. While Ireland is highly reliant on the ICT sector for employment, tax revenue and value added, the Central Bank has stated that job losses to date are not considered significant or a threat to the broader economy.
Redundancies in the information and communication sector are taking place throughout Europe, beyond Ireland, and are especially noticeable in the Member States with the highest number of workers in the sector, such as Germany and France. The ERM has recorded several cases of redundancies announced by well-known tech companies, including Twitter, Stripe, PayPal, SAP, IBM, Spotify, Hubspot and Yahoo, which have cut jobs in Germany, Spain, France, Italy, Portugal and Ireland. Smaller and perhaps less well-known EU tech companies are also laying off workers. For instance, Casavo (a platform connecting real estate buyers and sellers) is dismissing 150 people in Italy, Portugal and Spain, and Payfit (a French start-up specialising in the digitalisation and simplification of payroll and HR management for small and medium-sized enterprises) cut 200 jobs in France, Germany and Spain.
A major challenge in understanding the impact of big tech’s cost cutting on countries arises when these businesses have outsourced some operations to third-party providers. There is some evidence that contractors to big tech are affected by the trend to reduce the workforce. For example, Competence Call Center, the subcontractor for Facebook’s content moderation, has cut 250 jobs in Spain. Similarly, Accenture is cutting 19,000 jobs globally, and many of these employees are outsourced workers for companies such as Meta and Microsoft.
To assess the true impact of the recent job cuts, it is important to keep in mind that not every employee of the big tech giants is working in the main offices. For instance, in 2022, Meta stated that ‘83% of managers had direct reports in a different location and 24% of the employees were fully remote’, which suggests that, due to company teleworking policies, the big tech redundancies may not be confined to the country or the city where they were announced.
What next?
Recent job cuts by tech companies in the EU’s information and communication sector are small relative to the extraordinary headcount growth in previous years; the sector, including the multinationals, continues to be a strong part of the EU economy. The spate of redundancies since the end of 2022 has been called a ‘right-sizing exercise’ (a phrase used by Salesforce, as well as CEOs such as Meta’s Mark Zuckerberg). However, the real impact on the EU workforce may lie in the way the restructuring is managed and implemented. In this respect, the following points are relevant:
- So far, there has been little publicity about the redundancy conditions offered to the workers affected and little detail about the employment conditions of those workers who were laid off in recent restructurings
- Further ‘right-sizing’ may no longer be captured by focusing on large-scale restructuring and could be dealt with by companies’ human resources management. According to some media, the big-tech companies have reconsidered their staff performance review policies lately, , which may open pathways to adjusting the workforce size in a more incremental manner.
- Trade union participation in restructuring processes has been limited or non-existent among the tech companies. However, since the recent restructurings, there has been a rapid increase in membership of the Alphabet Workers Union, and a European works council for Google’s workforce has been organised.
- Notably, redundancies were not of the same scale across the Member States – for instance, Google avoided redundancies in Austria, Greece and Romania. The reasons may have to do with both labour law and the functional importance of the company establishments in different countries. However, further changes may spill over beyond the core workforces of the big tech companies to affect their contractors, which arguably are an integral part of their business model.
- Finally, the ICT sector in the EU continues to be one with persistent labour shortages. While not all companies can compete with the big tech giants in terms of the jobs they offer, there may be niche employers and start-ups that will be keen to engage with workers who are leaving the big tech giants.
Image © Gorodenkoff/Adobe Stock
Footnotes
